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Stocks Dive as Worries About Asia Reverberate

A worker at a textile plant in Huaibei, China. A report showed that Chinese manufacturing activity in August fell to a three-year low.Credit
CHINATOPIX, via Associated Press

Keep the seatbelts on.

Stock markets around the world tumbled Tuesday, dashing hopes that financial markets would calm down after two weeks of turbulence.

Investors appear to be growing more nervous about the strength of the global economy. China released a weak report on manufacturing on Tuesday, and an influential international policy maker sounded a downbeat note on the outlook for Asian economies. In early trading on Wednesday, Chinese stocks again fell sharply, leaving the Shanghai composite index 40 percent lower than its recent peak. The price of contracts for the future delivery of oil, an indicator of the course of economic activity, also continued to drop in Asian trading.

In the United States, the Standard & Poor’s 500-stock index slid 58.33 points, or 2.96 percent on Tuesday. The benchmark is now 10.2 percent below its nominal high, putting it back in a correction — the Wall Street term for a decline of more than 10 percent from a peak level. The S.&P. 500 index is still 2.48 percent above the low it closed at last week.

But the underlying ugliness of the action — only three stocks in the S.&P. 500 rose — suggested that the market could have further to drop.

And some analysts said it might be a while before the market recovers.

“You rarely get a V-shaped bottom,” said John De Clue, an investment officer for U.S. Bank. “You usually bounce around for a while.”

The Dow Minute by Minute

Position of the Dow Jones industrial average at 1-minute intervals on Tuesday.

16,600

Previous close

16,528.03

16,400

16,200

16,000

10 a.m.

Noon

2 p.m.

4 p.m.

Source: Reuters

SEPT. 1, 2015

By The New York Times

The Dow Jones industrial average, a popular market barometer, lost 469.68 points, or 2.84 percent, on Tuesday, to close at 16,058.35. The index is more than 12 percent below its nominal high, reached in May. The technology-heavy Nasdaq composite index dropped 2.94 percent on the day, and is down 11 percent from its recent high.

Investors are now scouring the horizon for events that drive the markets up or down.

Looming at the end of this week is the release of the United States jobs numbers. If the government figures on Friday show that employment growth has remained strong, investors may be encouraged that developments overseas will not do too much harm to the American economy. On the other hand, a robust jobs number may also lead investors to conclude that the Federal Reserve will raise interest rates this month, rather than wait longer.

“The jobs numbers on Friday will be really important,” said Edward J. Perkin, chief equity investment officer at Eaton Vance Management. “It will determine Fed policy one way or another.” If the Fed decides to raise rates this month, it will most likely announce the move after monetary policy meetings scheduled for Sept. 16 and 17.

The prospect of a September rise in interest rates has worried many economists and investors. In particular, they assert that the low level of inflation in the United States is a sign that the economy is still quite vulnerable to a slowdown.

In a speech in New York on Tuesday, Eric S. Rosengren, the president of the Federal Reserve Bank of Boston, highlighted that inflation numbers were well below the Fed’s target of 2 percent. Mr. Rosengren, who is an alternate member of the Fed’s committee on interest rates, also suggested that a weaker global economy and turmoil in the markets might make reaching that level harder.

“Given the low wage and price inflation data seen to date, and increased uncertainty about global growth, it will be particularly important for monetary-policy makers to closely monitor and depend on incoming data,” he said.

Even if the Fed decides not to increase rates this month, further problems in China and elsewhere could make investors reluctant to jump back into the stock market.

On Tuesday, a report from Beijing showed that Chinese manufacturing activity had slipped in August to a three-year low, with both current production and new orders falling. That added to fears that the world’s second-largest economy, after that of the United States, may be slowing more than analysts had believed.

Christine Lagarde, the managing director of the International Monetary Fund, warned on Tuesday that the world economy would most likely expand at only a moderate pace and would probably be weaker than the I.M.F. forecast two months ago.

“Asia as a region is still expected to lead global growth,” she said in a speech in Jakarta, Indonesia. “But even here, the pace is turning out slower than expected — with the risk that it may slow even further given the recent spike in global risk aversion and financial market volatility.”

The sell-offs in global markets started soon after China unexpectedly devalued its currency, the renminbi, on Aug. 11. Analysts at the time said the move could bolster Chinese exports by making them cheaper in other currencies. It was also expected to reduce Chinese imports, since foreign goods and services would cost more in renminbi.

Both outcomes, however, could affect countries with economies that rely heavily on exports. As a result, such countries may decide to further devalue their currencies to regain competitiveness with China. The high stakes of such rivalries were made clear on Tuesday when South Korea reported export figures for August that were well below expectations.

In contrast with past periods of turbulence, this one has not so far spurred a fierce rally in the 10-year Treasury note, a safe-haven investment. Its yield fell slightly to 2.16 percent on Tuesday from 2.21 percent on Monday.

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Adding to the nervousness on Tuesday, the price of oil fell after a strong rally in recent days. The benchmark crude contract in New York declined $3.79, or 7.7 percent, to $45.41. Over time, a lower price might signal less demand for oil as economies slow.

The Vix index, a measure of volatility in the S.&P. 500 that is often called Wall Street’s fear gauge, jumped 10 percent, but it is still well below last week’s high.

In another sign that investors remain pessimistic, European shares declined despite an official report on Tuesday showing that the jobless rate in the eurozone had slipped by 0.2 of a percentage point in July, to 10.9 percent — the first time it had sunk below 11 percent since early 2012. While that still leaves about 17.5 million people classified as unemployed, it suggests a modest economic recovery in the bloc.

The major European indexes all closed the day 2 to 3 percent lower. In London, the FTSE 100 fell 3 percent, while the CAC 40 in Paris ended down 2.4 percent.

A version of this article appears in print on September 2, 2015, on Page B1 of the New York edition with the headline: Stocks Dive as Worries About Asia Reverberate. Order Reprints|Today's Paper|Subscribe